How Does a Rental Deposit Work?

by Rose Kivi ; Updated July 27, 2017

What is a Rental Deposit?

Rental deposits, also called security deposits, is money that is paid to a landlord by a tenant to help protect the landlord against possible financial loss. The rental deposit is held by the landlord during the term of the rental and refunded at the termination of the rental lease. The landlord returns the rental deposit to the tenant at the end of the rental term unless the tenant has failed to pay owed rent or has damaged the rental property. In the case of owed rent or damaged property, the landlord deducts the money owed from the rental deposit and refunds the remaining balance, if any, to the tenant.

When Rental Deposits are Paid

Rental deposits are paid at the initiation of a rental and are charged in both residential and commercial rentals. The most common amount charged for a rental deposit is the amount equal to 1 month's rent. A landlord usually requires a larger rental deposit for furnished properties and to tenants who have pets.

Laws Pertaining to Rental Deposits

Each state has different rules that govern rental deposits. For example, in California, a residential landlord can't charge more than the equivalent of 2 months rent for a unfurnished residential deposit. If the tenant will have a water bed, then the landlord can charge 2 1/2 months rent. Most states have laws that govern what types of damage can constitute a hold of a renters deposit. For instance, normal wear and tear can't be considered a reason to withhold the rental deposit. In most states, if a landlord withholds rent for property damage, they must provide the tenant with an itemized list detailing the damages and costs to repair. States have different laws pertaining to the time frame in which a rental deposit must be refunded to a tenant.

Additional Information

Information for individual state and local city rules regarding rental deposits can be found at the local court house, by a local attorney, by a local tenant's rights group, at a legal library or in a tenant's rights book in a book store. If a landlord refuses to refund a rental deposit or illegally withholds part or all of the rental deposit, a tenant can file a claim in the local court to legally take action against the landlord. The local court can provide a tenant with the necessary forms to fill out to start a court case.